Paulson: America's economic lessons

America has had its share of difficult economic times in its impressive history. Some were long-lasting; some have been short-lived.

Have you heard about the great depression of 1920? How about the depression of 1946? Of course not! These difficult economic periods were short-lived and were followed by impressive periods of economic growth. There's another reason you don't hear about them today — the lessons learned fly in the face of President Barack Obama's plan for transforming America and stimulating economic growth!

In the severe economic downturn of 1920-21, there were no stimulus packages or bailing out of businesses "too big to fail." President Warren Harding let businesses fail, actually cut government spending 23 percent and lowered income taxes for all groups. The economy righted itself and fueled the Roaring '20s.

Instead of learning from Harding after the Crash of 1929, both President Herbert Hoover and President Franklin D. Roosevelt raised taxes, launched public works, extended emergency loans to failing businesses and lent money to states for relief programs. FDR further expanded government and initiated expensive entitlement programs. Sound familiar? Their policies didn't save America; they extended the Great Depression.

Was Harding's approach a fluke? President Harry Truman planned to continue many of FDR's "New Deal" policies. Writing this year in the Journal of the American Enterprise Institute, Michael Barone noted that less than a month after the surrender of Japan, Truman "called for continued price controls, a full-employment bill, a higher minimum wage, a public- and private-housing bill, and only limited cuts in the high wartime tax rates. In December 1945, he called for national health insurance."

As a result, Republicans rode into control of both houses of Congress in the 1946 mid-term elections by riding the theme: "Had enough? Vote Republican!" Citizens "had enough" of inflation, enough high taxes, enough price controls, and enough coddling of unions with their frequent strikes. Out of control of Congress since 1930, Republicans promised to end controls, lower taxes and restrict labor unions. The strategy worked: in 1946, both houses of Congress flipped.

We face a similar time today. It's time we learn from history. Increasing government spending will never produce sustained prosperity. Every time we have cut government spending and lowered taxes, we have stimulated the private sector, produced jobs and unleashed economic growth.

In 1980 and 2001, President Ronald Reagan and President George W. Bush helped turn around the economy with tax cuts. Unfortunately, without spending cuts, the federal government just got bigger.

I'm optimistic that America will once again right its course.

Polls indicate that Republicans may be given another chance to learn from both their past successes and failures. This time, they must do more than lower taxes; they must actually cut government spending before Washington drowns us all in debt we can't pay off. Had enough?

— Terry Paulson of Agoura Hills is a speaker and author of "The Optimism Advantage." E-mail him at terry@terrypaulson.com.